By Brad Ryder
Every company, regardless of size, should have an employee handbook that outlines the employees’ rights and responsibilities under applicable federal and state law. As a general rule, the more employees a company has, the more voluminous and detailed its employee handbook will likely be.
The employee handbook must include a disclaimer, which states that it does not create a contract of employment. The disclaimer should read, in substance, as follows:
I acknowledge having received a copy of ABC, Inc.’s Employee Handbook and that I have been asked to carefully read it. I understand that ABC, Inc. reserves the right to revise any policies contained in the Employee Handbook, as it deems appropriate. I further understand that the Employee Handbook is not a contract of employment; that nothing in the Employee Handbook can be interpreted to be a contract of employment for any specified period of time; and that my employment is at will, which means that either ABC, Inc. or I may terminate the employment relationship at any time, for any reason, with or without cause, and without or without prior notice.
In the absence of such language being included in the employee handbook, there is a potentially significant risk that termination of employment could result in the company being held liable for breach of contract.[1]
To ensure the company is able to later prove that employees received the employee handbook, it is best to follow these practices:
- Employees should sign an acknowledgement that they received, read, and understand the employee handbook.
- Employees should provide a “wet” signature instead of, or in addition to, an electronic signature, whenever possible.
- If the company utilizes a fully-electronic procedure for its employee handbook that does not provide a mechanism for obtaining a wet signature, each employee should be assigned a unique username and password.
- If employees are provided a username and password, the employee handbook should state that it is grounds for termination if either the username or password is shared with anyone else.
Other recommended best practices include:
- The employee handbook should specify what obligations are imposed on the employee (e., duty to promptly inform company of any allegations of harassment or discrimination).
- The employee handbook must be consistent with applicable federal and state law.
- The employee handbook should be updated periodically to remain current with changes in the law and with the company’s procedures.
- Each time the employee handbook is updated, the company should follow the procedure outlined above to ensure that there is a record of all employees having received the updated version.
By implementing and consistently applying these practices, a company can minimize the likelihood of employees being able to successfully argue that the termination of their employment was in violation of the company’s employee handbook or otherwise gives rise to a claim for breach of contract.
If you have questions about drafting employment policies, developing an investigation plan, conducting an investigation of harassment or discrimination, or other employment-related issues, feel free to contact me at (256) 534-3288 or brad@ryderlaw.com.
[1] See Hoffman-La Roche, Inc. v. Campbell, 512 So. 2d 725 (Ala. 1987) (employee handbook that contains a valid disclaimer does not create a contract of employment). But see Davis v. City of Montevallo, 2023 WL 180252 (January 13, 2023) (employee handbook specifying a procedure that must be followed to terminate an employee may constitute a contract as to the termination process).
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